Patent Reform Bill Would Curtail Lawsuits Against Those Who Falsely Claim Patent Protection

from the lying-is-just-fine dept

Earlier this year, we wrote about the rise of patent marking lawsuits after a court clarified how damages were calculated, making the potential haul much, much, much larger in many cases. Patent marking cases involve lawsuits against anyone who falsely claims a patent over something -- whether it's just a false claim or a situation where the patent has expired. If you recognize how patents can hold back innovation, a fake patent claim can be even worse, actively discouraging competition or research and development, even in situations where there is no government granted monopoly. Where this gets a little tricky, is that the law lets anyone bring false marking lawsuits and keep half the resulting award if they win. So the fear is that this has created a new batch of lawyers just roaming around filing such lawsuits. But is that really such a problem? Falsely claiming a monopoly over something can have serious consequences. In fact, it would be great if there were a similar law for copyfraud situations as well.

Unfortunately, though, it looks like the already troubling patent reform bill also is looking to cut back on the ability to file false marking suits. Daniel Ravicher, who has been really active in these kinds of lawsuits -- and, incidentally, was also a major player in the Myriad gene patent case -- helping to get gene patents invalidated -- has an article up trashing the patent reform bill for "protecting patent lying."

The Senators held no hearings and didn't seek any comment from the public. To anyone with knowledge of U.S. patent law, the move is clearly the result of back room dealings with lobbyists completely hidden from public scrutiny. Allowing patent lying not only denies citizens a traditional consumer protection, but it also deprives the federal government of an important source of revenue....

A patent gives its owner the right to exclude anyone else from making, using, or selling the patented thing for a limited period of time. Patents are very powerful; just ask your neighborhood pharmaceutical company. To protect the public from misinformation about patents, section 292 of the Patent Act forbids false markings done "for the purpose of deceiving the public." The law is aimed at companies who intentionally make untrue statements with the hope of deceiving the public, not those who make good faith mistakes. Patent lying is harmful to the public for many reasons. It misleads consumers into thinking the product is better than others, it scares away competitors, and it robs legitimate patentees of the marketplace distinction they deserve.

Once again, it looks like the patent reform bill isn't about fixing the problems of the patent system, but about making things worse. It's difficult to see why anyone could, with a straight face, claim that the law shouldn't punish those who falsely claim a patent over something.

Disagree with you on this

When patents were tied to devices and information was otherwise hard to get, the patent marking requirement might have served some useful notice function. But now, no one knows how to provide notice on intangibles, and I would be shocked if any secondary users relied on the patent marking one way or another as opposed to doing patent searches, etc. Now, it is mostly a trap for the unwary who fail to remove expired patents from the patent notice. Combined with the potential for sky-high damages created by the Federal Circuit, I really think this is all antiquated infrastructure built for a different time, and it needs to be fixed. Eric.

Re: Disagree with you on this

I would be shocked if any secondary users relied on the patent marking one way or another as opposed to doing patent searches, etc. Now, it is mostly a trap for the unwary who fail to remove expired patents from the patent notice.

Perhaps. And I definitely did express some concerns about abuse in my original post on patent marking -- but I do think that there's something very wrong with claiming a monopoly on something where you have none. And given how little incentive people have had in the past to fight back against such false claims, there's something to be said for having a real stick here.

"It's difficult to see why anyone could, with a straight face, claim that the law shouldn't punish those who falsely claim a patent over something. "

We value IP privilege protections more than we value protecting against fraud. Fraud, who cares, commit fraud all you want, the consequences are a mere slap in the wrist. But infringe on someone's intellectual property privilege? Huge problem.

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Section 292 to Title 35 should be read in conjunction with Section 287, the latter dealing with marking so as to give notice to the "public" (i.e., potential infringers), and the former dealing with giving false notice to the same "public".

What is proposed to be amended is the current 292(b), which pertains to qui tam actions. It would be replaced with a new 292(b) providing for civil damages in the event one sustains monetary damage as a result of a false marking. Section 298(a) would remain unaltered, including a quasi-criminal provision that would be pursued, if at all, by the DOJ. If a fine is levied under 298(a), the entirety of the fine would go to the US Treasury.

Over the course of the last two years or so a whole new class of "trolls" has arisen. Unlike the "trolls" regularly criticized for pursuing lawsuits based upon the possession of mere "paper" (a patent), this new class is nothing more that a group of lawyers who have discovered a way to turn a quick buck without having done anything other than lying in wait for a patentee or patent applicant to make a mistake (something that can easily happen without any intent to do so).

A similar class of "trolls" sprung up several years ago to take advantage of a technical feature in California's Business and Professions Code. It was abused by certain lawyers (who were subsequently disciplined by the California Bar) to such an extent that its qui tam provision was stricken from the pertinent statute.

Qui tam actions have a history dating back to England and do serve a useful purpose, but like anything with money making potential it can be abused. What is happening under Section 292 is almost exclusively an abuse of the law. In fact, until just recently actions under Section 292 were virtually non-existent since it was generally viewed as statute directed to attempts to mislead potential competitors, and not the public at large.

The original post is somewhat misleading

From what I heard (and I don't have any links) the proposed amendments bring the false patent marking lawsuits in line with the trademark violation, where you can only sue if you are directly affected by a false marking - i.e. if you are a competitor.

This makes sense to me as as a consumer I don't really care if the item i am using has false or expired patent numbers. The point of stamping products with a patent number is not usually for the benefit of the consumer but more to dissuade a competitor from infringing on your patent. Have a look here:

A patent marking on the product or associated packaging provides constructive notice to potential infringers. That permits a patentee to collect damages for infringement even if the infringer had no actual knowledge of the patent before the patentee filed an infringement suit.

Again, I think this makes sense, as the rush of false patent suits is a cash grab for lawyers that are not in any way affected by "patent lying". I also think that the key element to this is per article fines, and the fact that any Joe Bloe can file a suit will not reduce the amount of suits being filed. All those looking to profit from the affair will just offer their services to direct competitors of affected products.

So, the chilling effect will still be the same, it's just the beneficiaries of the litigation will be those that are mostly affected by false marking.

To touch on Ravicher's point about misleading the customer claiming "a patented formula". I would think that any promotional material associated with the product is distinct from patent marking and goes under misleading advertising regulations which is the domain of the FCC.

Another thing to think about. If the patent for a dog formula expires and you remove the patent number from the packaging, can you still claim that it's a patented formula? After all, the formula was patented at some time.

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"Over the course of the last two years or so a whole new class of "trolls" has arisen. Unlike the "trolls" regularly criticized for pursuing lawsuits based upon the possession of mere "paper" (a patent), this new class is nothing more that a group of lawyers who have discovered a way to turn a quick buck without having done anything other than lying in wait for a patentee or patent applicant to make a mistake (something that can easily happen without any intent to do so)."

No, what can happen far more easily, without any intent to do so, is for someone to accidentally infringe on a patent they never knew about. Instead, people are expected to do expensive patent searches before they breath the wrong way or swing sideways on a swing in fear of infringement. That's ridiculous. and the punishment for unintentional infringement is insane.

However, ensuring that someone indeed has a patent they claim to have is much less ridiculous than ensuring no one has a patent to anything someone does. As a result, the burden should be on someone who claims to have a patent or who wants a patent to ensure they do indeed have a patent and to go through the proper process of acquiring the patent and to ensure they properly acquired the patent before they start filing lawsuits or claim to have a patent on something. It makes every bit of sense that the burden of ensuring that someone does properly acquire and have a non expired patent before they sue should be far greater than the burden of ensuring no one has a patent on something before acting a certain way or selling a certain product or creating a certain innovation. As a result, the punishment for not ensuring that you properly have a patent before suing should be far greater than the punishment for accidentally infringing on a patent one does not have. The system should not encourage patent holders to be lazy or fraudulent. It should give them sufficient incentive to properly file for a patent and to ensure that they properly acquired the patent before they sue.

But IP maximists just want to be lazy, they want to be able to sue anyone without even doing the small amount of work necessary to ensure that they properly acquired a patent they are suing for and that the patent they are suing for has not expired. Yet they want to put society through the far more substantial burden of trying to prove that no one has a patent on something before doing anything. IP maximists want to be able to make money and not do any work. If an IP maximist can't even be bothered to ensure that they properly have a patent they are suing for and that the patent hasn't expired, how can they expect the rest of society to ensure that no one else has a patent on something that anyone wants to do and to ensure that such patents aren't expired? and how can I expect IP maximists to even innovate if they are too lazy to even ensure they properly have a patent they claim to have?

Re: The original post is somewhat misleading

"This makes sense to me as as a consumer I don't really care if the item i am using has false or expired patent numbers."

As a consumer I care if competitors are not selling a product because they think that someone has a non expired patent on it when in fact they do not. It makes the prices higher, it (and patents in general) hinders innovation (which is bad for consumers), and it reduces quality.

"To touch on Ravicher's point about misleading the customer claiming "a patented formula". I would think that any promotional material associated with the product is distinct from patent marking and goes under misleading advertising regulations which is the domain of the FCC."

The FCC is almost useless in terms of actually protecting the consumer.

Re: The original post is somewhat misleading

"Again, I think this makes sense, as the rush of false patent suits is a cash grab for lawyers that are not in any way affected by "patent lying"."

I think a system that awards those who go after fraudulent patent holders is a good thing being that patents are a privilege that society can do perfectly well without. The DOJ and the government are useless at going after fraudulent patent holders and those fraudulent patent holders have no incentive to even bother to check if a patent expired.

It makes sense that patents expire after twenty years, and these fraudulent patent holders should know that. If they aren't willing to go through the effort to check which patents have expired before claiming a patent on something then they should know, ahead of time, that they will end up claiming patents on something they no longer have a patent on, and so their behavior is fraudulent since, by claiming patents on everything and not keeping track of which patents have expired and which ones haven't, they are intentionally claiming patents on ideas they do not have patents on.

Re: Re: The original post is somewhat misleading

(to continue)

It's like with the search engine issue. IP maximists want to have it both ways, they claim that search engines and torrent servers etc... should actively ensure that their service stops all infringing material or else they will claim that the service should be shut down and that those who run the service should be severely punished. Yet they want to be able to claim to have a patent/copyprivilege on something they do not have such privileges on without even going through the minor trouble of ensuring they do indeed have such privileges and they don't want to get sufficiently punished if they're wrong. They want it both ways, they want to force others to do unnecessary work but they don't want to do any work themselves. These people are too lazy to even ensure they have privileges on something before issuing a DMCA takedown or before suing and they are certainly far too lazy to innovate.

Re: The original post is somewhat misleading

This makes sense to me as as a consumer I don't really care if the item i am using has false or expired patent numbers.

How about something that you *aren't* using due to patent fraud?

The point of stamping products with a patent number is not usually for the benefit of the consumer but more to dissuade a competitor from infringing on your patent.

You don't seem to know much about patents. Patents apply to end-users (consumers) as well.

A patent marking on the product or associated packaging provides constructive notice to potential infringers. That permits a patentee to collect damages for infringement even if the infringer had no actual knowledge of the patent before the patentee filed an infringement suit.

That applies even to end-users or consumers unwittingly using an infringing product. Ain't patent law great?

Another thing to think about. If the patent for a dog formula expires and you remove the patent number from the packaging, can you still claim that it's a patented formula? After all, the formula was patented at some time.

That would be illegal. You really should try to read up on patent law before commenting so much on it.

Re: Straight Faces

The problem is that politicians are puppets. Half the time they have no clue what they're saying, they're just repeating some memo they got from the RIAA, MPAA, Pharmaceutical corporations, and whoever else funded their campaigns. Regarding it's truth, the politician doesn't know and could care less.

No one is saying that those who mark their products with incorrect or expired patents should not be penalised. It's just it makes more sense that only those who are directly affected by the incorrect marking should claim liability.

An indirect "If you haven't marked the product incorrectly than a competitor would release a product which will result in more competition" argument is as nonsensical as piracy is lost profit argument. Sure, there is an impact on the consumer, but the effect on other manufacturers is far greater.

I find it hard to believe that an expired patent will stop a competitor from releasing a product. They will do more research into it and dig up the actual patent and see whether or not it is applicable or expired. At that point they can sue the manufacturer of the incorrectly marked product, if that is the case. Oh, and they also have to prove intent to deceive.

I see this as an attempt to stamp down on incorrect patent marking trolling. This will not and should not limit liability for those that fraudulently mark products with incorrect/expired patents.

Re: Re: The original post is somewhat misleading

That would be illegal. You really should try to read up on patent law before commenting so much on it.

Yes, I should have. In fact it was in that same article I linked earlier:

A relatively recent district court case, however, appears to have broadened that definition by holding that once a patent has expired, a product covered by that patent is an “unpatented article” under section 292(a). Pequignot v. Solo Cup Co., 540 F. Supp. 2d 649, 653 (E.D. Va. 2008), appeal pending, No. 09-1547 (Fed. Cir.). If that decision is affirmed on appeal, a marking that states “This product is protected under U.S. Patent X,” where X has expired, would violate section 292(a) if the requisite intent to deceive the public is proven.

I did post in haste, however, the hypothetical is not as stupid as you made it out to be. The decision is fairly recent (Dec 2009) and might be overturned on appeal.

Re:

"Sure, there is an impact on the consumer, but the effect on other manufacturers is far greater."

Irrelevant, the whole purpose of markets and the IP system as a whole is to promote the progress, not to serve the best interest of some special interest group. It should be about what's best for society as a whole.

Re:

"I find it hard to believe that an expired patent will stop a competitor from releasing a product. They will do more research into it and dig up the actual patent and see whether or not it is applicable or expired. At that point they can sue the manufacturer of the incorrectly marked product, if that is the case."

Which just takes away resources that could go into innovation.

"Oh, and they also have to prove intent to deceive. "

and this is nonsense. as stated before (for reasons already stated), the punishment for unintentionally claiming an expired patent should be AT LEAST far greater than the punishment of unintentionally infringing on a patent.

Re: Re:

(to continue)

and any entity that claims a patent or sued for infringement that doesn't sufficiently check which patents are expired should automatically be considered one that is intending to deceive exactly because it should have known that patents expire every so often and therefore if it holds and claims patents without sufficiently checking their expiration date it will invariably end up claiming patents patents that have expired.

Re: Re:

and those reasons, in case you missed them, are

A: The patent holder is in a better position than outsiders to determine which of its patents it still owns and which of its patents have expired.

B: The patent holder is the one who benefits from these unowed privileges and, in return for having such privileges, can at least have the decency to ensure that it still has said privileges before claiming that it does and that they haven't expired. Part of the responsibility that goes with having a patent should be to keep up with its status and if patent holders can't even take on such a minor responsibility then they don't deserve to have a patent to begin with. Why should society trust someone who can't even check the status of a patent to innovate by handing them over an unowed monopoly?

Re: Re:

Re: Re: Re:

The fact that IP laws are ridiculous and need to be either done away with or substantially alleviated (ie: copyright length, patent length, etc...) and that there needs to be much more incentive to punish those who falsely claim IP over something they do not have IP over.

Re: Re: Re:

and the same thing should apply to copyprivilege holders. Just like with patent holders, the copy privilege holder is in a far better position to determine the status of a copy privilege (ie: who owns it, whether or not it's expired) than anyone else. And therefore the burden should be on the copy privilege holder to ensure they do indeed hold a copy privilege on something before claiming to or suing. The punishment for not meeting this obligation should result in fines at least far greater than the fines of unintentional infringement (and there should be a centralized directory that copy privilege holders must register to where anyone can look up the copy privilege status of something since people shouldn't be expected to be psychic and magically know. but I don't expect lawmakers to pass equitable laws anytime soon).

but IP maximists know better, it's just that they are corrupt and have no regard for morality. and as proof I present to you the current corrupt IP laws in place (ie: copy privilege length), which is simply more evidence against the true intent of IP in general, it has nothing to do with promoting the progress and much more to do with exploiting the public unfairly.

It's also amazing how fast politicians are when it comes to passing laws that favor IP maximists at their request whenever IP maximists find that people have found a way to hold them accountable for their bad behavior. But when it comes to actually fixing the broken laws in a way that favors the public (ie: reducing copy privilege and patent length and ensuring that those who accidentally claim privileges on something they do not have privileges on get punished at least far worse than someone who accidentally infringes on something) lawmakers do nothing. Just more evidence that lawmakers do not intend to serve the public good which is evidence to the fact that the laws in place are equally intended not to serve the public good. IP is not intended to serve the public good, it never was, it's only intended to exploit the public and the corrupt lawmakers and IP maximists make that part very obvious.

Re:

It's just it makes more sense that only those who are directly affected by the incorrect marking should claim liability.

If something is not under a patent, then it belongs to society. If someone falsely claims a patent on something, they have lied and said that it cannot be used by society, only by themselves. Thus, it stands to reason that all of society is directly affected if someone falsely claims a patent on something, yes?

Re: Re:

Exactly, it's called the PUBLIC domain, it belongs to the PUBLIC and so the public should be allowed to sue. and our government is worse than useless in respect to bringing criminal charges against actual criminals (the laws are only designed to protect the guilty).

glacial pace

"If you recognize how patents can hold back innovation..."

Obviously, the opposite is true. Without patents, large companies flush with cash can copy smaller firms innovations and elbow them out of the markets they create. Until the US patent system technological progress eked along at glacial pace. How much does Microsoft pay you to write this rubbish?

Patent reform is a fraud on America. It is patently un-American.
Please see http://truereform.piausa.org/ for a different/opposing view on patent reform.

Re: The original post is somewhat misleading

"To touch on Ravicher's point about misleading the customer"
You need to look at who Ravicher is and who is funding him. As far as I can tell there is nothing public about his enterprise. Since he started the false making situation I expect that there are numerous big companies who are looking at his operation. The fallout should be quite entertaining.

Until the US patent system technological progress eked along at glacial pace. How much does Microsoft pay you to write this rubbish?

Uh, this is simply false. The pace of innovation in countries without a patent system tends to be the same if not greater than those with a patent system. And the pace of innovation in US industries that were not protected by patents (software until the 90s) was much faster as well. You are simply wrong.

As for who pays me, no one other than myself has any say in what we write. No one pays me to write anything. And I don't know why you keep saying Microsoft since just a few posts earlier I was slamming Microsoft's own patent policies. You seem to have a real reading comprehension problem.

Patent reform is a fraud on America. It is patently un-American.

Speaking of your reading comprehension problem, did you not notice that the entire point of this post is against the patent reform bill?